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The Calamos Convertible and High Income Fund (NASDAQ:CHY) was formed in May 2003. CHY seeks total return from current income and capital appreciation by investing in a diversified portfolio of convertible securities and high yield bonds. The fund is a good choice for investors who are focussed on long term total return and look for managers who use dynamic asset allocation to retain a consistent risk/reward balance throughout the market cycle. CHY is run by John Calamos, Sr. and Nick Calamos who have many years experience in the investment industry.

The fund uses a managed distribution policy and interest rate swap leverage (23%) to achieve its goals. The fund emphasizes companies that offer reliable debt servicing, respectable balance sheets and prospects for sustainable growth. CHY invests mainly in securities of US issuers, but looks for companies that actively participate in globalization, with geographically diversified revenue streams and business strategies.

This is the fund's investment breakdown as of June 30, 2011:

Overall Investment Breakdown

Corporate Bonds

62.5%

Convertible Bonds

16.2%

Convertible Preferred Stock

9.4%

Synthetic Convertibles

4.5%

Common Stock

3.1%

Sovereign Bonds

1.2%

US Government securities

0.6%

Cash and Receivables/Payables

2.5%

CHY has a good long term NAV performance record, but suffered a down year in 2008 when its net asset value fell -38.5%.

3 Year Total Return (NAV)= 10.65%

5 year Total return (NAV)= 7.74%

Here is the year-by-year total return NAV performance record since inception:

NAV Performance

2004

16.82%

2005

4.73%

2006

13.98%

2007

4.69%

2008

-36.48%

2009

66.07%

2010

15.15%

YTD

4.40%

Quality Allocation (as of 6/30/2011)

AAA

0.7%

AA

0%

A

6.9%

BBB

15.1%

BB

47.3%

B

20.8%

CCC and below

1.0%

Unrated

8.2%

Interest Rate Swap Maturity Characteristics

MATURITY

Notional Amount

% of Total Swap

Swap Rate

4/2012

75,000,000

31%

1.865%

4/2014

115,000,000

47%

2.43%

9/2012

53,000,000

22%

1.8525%

CHY Summary Statistics

Calamos Convertible and High Income Fund (CHY)

  • Total Net Assets: 1,228.4 Million
  • Total Common Assets: 942.4 Million
  • Annual Distribution (Market) Rate= 8.17%
  • Last Regular Monthly Distribution= $0.085 (Annual= $1.02)
  • Fund Expense ratio: 1.19% Discount to NAV= -4.95%
  • Portfolio Turnover rate: 39%
  • Effective Leverage: 23.28%
  • Average Daily Volume (shares)= 188,000
  • Average Dollar Volume = $2.45 Million

CHY is currently selling at a discount to NAV of -4.95% compared to the 6 month average premium of 0.56%. The 1-Year Z-Statistic is -2.54. This means the current discount to net asset value is more than two standard deviation below the mean. CHY has good trading liquidity and usually trades with a bid-asked spread of one or two cents.

CHY is attractively priced at current levels. It has often sold at a premium over net asset value in the past. The current 5% discount has been caused by upcoming showdown around the debt limit and provides a good entry point for longer term investors.

Disclosure: I am long CHY.

Source: Calamos Fund: Attractively Priced at Current Levels